Finance Minister Pichai Chunhavajira has reiterated that access to sources of funding is more crucial than reducing interest rates.
Speaking after discussions with Bank of Thailand governor Sethaput Suthiwartnarueput on Thursday, Mr Pichai said he still stands by the principle that interest rate policy is the responsibility of the central bank’s Monetary Policy Committee (MPC), which will meet on Oct 16.
He described Thursday’s talks as wide-ranging, touching on changing circumstances including US and European interest rate cuts and Chinese economic stimulus, which will affect the inflow of funds into Thailand.
If domestic interest rates decrease, he said, it would relieve the burden on new borrowers, but loan approvals depend on the creditworthiness and repayment capacity of each individual.
Additionally, if interest rates decrease, bond yields will fall slightly, he noted.
The Bank of Thailand in August held its key rate at a decade-high 2.50% for a fifth straight meeting, and has been resisting calls from the government for a rate cut.
Mr Sethaput has maintained that lower rates would not do very much to help an economy that needs major structural reforms.
Regarding the impact of interest rate reductions on the Thai baht, which is expected to benefit the export sector, Mr Pichai said a decrease in rates is unlikely to affect the volume of exports. However, he was still optimistic about an uptick in export growth in the last quarter of this year.
He noted that interest rates are not the only tool available to the central bank, adding other tools must also be considered.
Nevertheless, Mr Pichai reiterated that as far as reducing interest rates and ensuring liquidity and access to funding sources are concerned, the latter is more important.
“Currently, the country does not have liquidity issues. We have sufficient liquidity, but lenders are concerned about extending their credit,” he said,
“In this regard, the Ministry of Finance and the Bank of Thailand will schedule another detailed discussion by the middle of this month.”
